Overseas Business Risk – Vietnam

We aim to provide information on this page on the key security and political risks which UK businesses may face when operating in Vietnam

Political and Economic

  • Vietnam has one party rule; therefore, the Communist Party of Vietnam (CPV) is seen as the ultimate guarantor of security and prosperity. The leaders are selected every 5 years at Party Congress. The most recent Congress was in January 2011 when it elected the new General Secretary, announced Politburo members who would undertake positions of power such as the Prime Minister and key Ministers and issued the country’s socio-economic development strategy till 2020.

  • Vietnam’s economic liberalisation programme, commonly known as “Doi Moi”, started in 1986. Since then, the country has made tremendous strides to become one of Asia’s high growth emerging markets. In the last decade, Vietnam has witnessed rapid economic expansion, GDP growth in real terms is forecasted to average 5.6% between 2012 and 2020.. Vietnam joined the WTO in 2007 and in 2010 the UK and Vietnam signed a Strategic Partnership Agreement. Vietnam is ranked 99th (out of 189) in the World Bank’s (WB) “Doing Business 2014” report. Although, this reflects the bureaucratic nature of conducting business, Vietnam is ahead of some of its regional neighbours, such as the Philippines (108), Indonesia (120) and Cambodia (137). Of the large BRIC economies only China is ranked slightly higher at 96th position.

  • Red tape and bureaucracy remains an issue facing companies in Vietnam. The WB survey and anecdotal evidence from businesses suggest that the situation is slowly improving. However, like other fast developing economies, there is still work to be done to address this issue. The UK-Vietnam’s Joint Economic and Trade Committee (JETCO) was set up in 2007 to identify and address any potential barriers to trade between the two countries.

  • Vietnam maintained an average growth rate of 7% in the decade to 2011. Since then, the Government have prioritised stability over growth, which has since fallen to around 5%. Vietnam is an increasingly important exporter, with companies such as Samsung making major investments here. This is driving the fast growing domestic demand for goods and services. Vietnam is trying to move up the value chain, including by increasing the quality of education and improving its infrastructure. The UK is in a good position to capture some of the opportunities emerging from this growth.

  • The Government has an extensive programme of reform of the State Owned Enterprises planned. Progress on this agenda has not been as fast as some had hoped, but the longer-term need for a transition to a more efficient economy with the private sector playing a greater role seems clear. SOEs currently represent around 40% of GDP, so the implications of these reforms will be significant. As the private sector continues to expand, so the economy is expected to become more dynamic, with emerging opportunities for UK businesses.

  • Check out the latest political and economic updates on Vietnam

  • The UK-Vietnam Strategic Partnership agreement, signed by the Foreign Secretary William Hague and Deputy Prime Minister Pham Gia Khiem in September 2010, was a significant step towards developing a stronger bilateral relationship. Trade and investment is one of the key components of this agreement; other key elements are education, the fight against illegal migration and organised crime, and development cooperation.

  • Vietnam does not welcome dissent. Internal conflict is rare. There are restrictions on freedom of speech which can affect internet usage, particularly the use of social media and personal blogs, access to which can be blocked without notice.

  • For more information, visit the FCO Vietnam Country Profile.

Business and Human Rights

  • Vietnam has ratified the core conventions of the ILO: ILO100 – Equal Remuneration for Work of Equal Value, ILO111 – Discrimination in Employment and Occupation, ILO138 – Minimum Age for Employment and ILO182 – Worst Forms of Child Labour Convention.

  • The right to freedom of association and to collective bargaining remains restricted in Vietnam. Vietnamese workers are not free to join or form independent unions and all unions must be affiliated with the Vietnam General Confederation of Labour (VGCL). This, and the failure of dispute settlement mechanisms to provide an effective channel to redress grievances, has led to an increasing number of wildcat strikes involving non-union members.

  • In June 2012 the Vietnamese National Assembly approved a revision of the Labour Code, which included a number of important provisions, including extending maternity leave to six months; setting out the requirement for a minimum wage, with hourly, daily, and monthly rates to be determined by geographic area and by industry; preventing employees from working more than 50 percent over their official working hours in a day; reducing the maximum term of work permits for foreign nationals working in Vietnam from three years to two years and removing the work permit exemption rule for foreign workers coming to Vietnam to work for less than three months.

  • At the same time the National Assembly also passed an amended version of the Law on Trade Unions, which defines the responsibilities of officially recognised trade unions to protect workers’ legitimate rights. The amended law did not remove the requirement for all trade unions to be officially affiliated to the Vietnam General Confederation of Labour (VGCL) nor the restriction on foreign workers from joining unions.

  • For more information on human right issues see the FCO’s Annual Human Rights report on Vietnam.

Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Corruption remains an issue in Vietnam. Anyone doing business in the country is likely to encounter, or hear of, corruption in one form or another. Practices such as facilitation payments, bribes and giving and receiving expensive gifts in order to develop business relationships are still a problem in certain places. In 2012, Vietnam was ranked 123 out of 174 in the World Transparency International Corruption Perceptions Index.

Our advice to companies encountering corruption is simple – don’t get involved. Not only are there issues of business integrity to bear in mind, but, of course, it is also, illegal. Invariably, corruption is related to lack of professionalism and control, all of which are damaging to long-term business.

The government is beginning to tackle this problem. The 11th National Congress in November 2005 passed a law on Preventing and Tackling Corruption. The law states that the act of corruption is a responsibility of all individuals, companies and authorities. Measures must be taken to prevent corruption from occurring.

At central level, the Anti-Corruption Committee has been set up to inspect and review corruption cases. At provincial and municipal level, there are also units in charge of corruption cases under the provincial/municipal police. There are various initiatives underway and the UK has taken on the role of lead donor on anti-corruption through a joint FCO-DFID team.

Read the information provided on our Bribery and corruption page.

Terrorism Threat

British nationals should avoid all demonstrations and large gatherings, which may turn violent.

See our Terrorism Abroad page.

Read the latest Travel Advice for Vietnam from the Foreign and Commonwealth Office.

Read the information provided on our Terrorism threat page

Protective Security Advice

The Centre for the Protection of National Infrastructure also provides protective security advice to businesses

Take precautions and be on your guard against pickpockets and bag snatchers.  Do not walk in secluded locations alone, or with people you do not know. Petty crime is not confined to the backpacker districts but also occurs in the main tourist shopping areas.

Avoid carrying handbags or wearing highly visible jewellery, especially necklaces, and expensive looking watches. When possible, leave passports and valuables in a hotel safe and only carry a photocopy of the data page of your passport. Use taxis after dark to minimise the risk of robbery.

There are known scams in Vietnam targeting tourists. There are reported cases of fake charities, gambling and taxi scams. Beware of people who strike up conversations with you in the street and invite you back to their home or tell you about the charity they work for. Some British Nationals have lost thousands through fixed card games.

Read the latest Travel Advice for Vietnam from the Foreign and Commonwealth Office.

Read the information provided on our Protective security advice page

Intellectual Property

  • Following accession to the World Trade Organisation (WTO) in January 2007 Vietnam has updated its IP laws to comply with the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs). There are still concerns, however, in particular on enforcement. The most recent EU Enforcement Survey in 2010 identified deficient enforcement of the domestic IPR regulations, lack of trained IPR officials and length and burdensomeness of proceedings still as the main weaknesses of the system.

  • Vietnam has put in place heavier fines and penalties for copyright infringement. However, concern is rising among rights holders that Vietnam’s IP enforcement system has not yet developed sufficiently to control the rapid growth of piracy and counterfeiting despite the substantial legislative work completed over the past several years. Vietnam is a priority country for the UK and remains in the 3rd category of priority countries for the EU.

Read the information provided on our Intellectual Property page.

Organised Crime

  • Along with drug and human trafficking crime, the other significant area of development over recent years has been e-crimes. UK businesses should be cautious when receiving unsolicited emails etc. Scams involving large amount of money in business deals are not uncommon.

Read the information provided on our Organised crime page.

More information is available on overseas business risk in a range of markets.

UK Trade & Investment Contact:

Paul.Higham@fco.gov.uk

Countries: Vietnam
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